Using new home production data for the United States, we estimate a model of structural transformation with a home production sector, allowing for both non-homotheticity of preferences and differential productivity growth in each sector. We report two main findings. First, the estimation results show that home services have a lower income elasticity than market services. Second, the slowdown in home labor productivity, which started in the late 70s, is a key determinant of the rise of market services. Our counterfactual experiment shows that, without the slowdown, the share of market services would have been lower by 7.5 percent in 2010.
"Does Home Production Drive Structural Transformation?"
American Economic Journal: Macroeconomics,
Household Production and Intrahousehold Allocation
Human Capital; Skills; Occupational Choice; Labor Productivity
Industrial Organization and Macroeconomics: Industrial Structure and Structural Change; Industrial Price Indices